INDIAN CEMENT AND ORS. versus STATE OF ANDHRA PRADESH AND ORS.

Citation: [1988] 2 S.C.R. 574 · Decided: 12-01-1988 · Supreme Court of India · Bench: RANGANATH MISRA · Disposal: Case Allowed

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Judgment (excerpt)

A 
INDIAN CEMENT AND ORS. 
v. 
STATE OF ANDHRA PRADESH AND ORS. 
JANUARY 12. !988 
B 
[RANGANATH MISRA AND MURARI MOHON DUTT. JJ.] 
Andhra Pradesh General Sales Tax Act, 1957-Central Sales Tax 
Act, 1956--Challenge to validity of notifications issued under sub-section 
(I) of section 9 and sub-section (5) of section 8-Respective/y-Of-As 
hit by provisions of Part Xlll of the Constitution. 
y. 
c 
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The State of Andhra Pradesh in exercise of powers conferred 
nnder sub-section (I) of section 9 of the Andhra Pradesh General Sales 
Tax Act, 1957, made an order on January 27, 1987, reducing the rate of 
tax on sale of Cement made to the manufacturing units of Cement 
products in the State. On the same date, the State of Andhra Pradesh 
D 
made another order in exercise of the powers conferred by sub-section 
(5) of section 8 of the Central Sales Tax Act, !956, reducing the tax 
leviable under the said Act in respect of sales of Cement in the course of 
the inter-State trade or commerce. 
The State of Karnataka in exercise of the powers conferred by 
E 
sub-section (5) of section 8 of the Central Sales Tax Act, 1956, issued a 
notification on 28.10.1987, reducing the rate of tax payable under the 
y 
said Act on the sale of Cement in the course of the inter-State trade or 
commerce. 
The petitioners-cement manufacturing concerns, their share-
F 
holders and their authorised stockists-filed this writ petition, challeng-
ing the vires of section 8(5) of the Central Sales Tax Act, 1956 (Central 
Act 74 of 1956) and the notifications referred to above as ultra vires the 
provisions contained in Part XIII of the Constitution providing that 
trade, commerce and inter-course throughout the territory of India 
shall be free. According to the petitioners the three orders referred to 
G 
above created trade barriers and directly impinged upon the freedom of 
trade, commerce and inter-course provided for in Article 30! of the 
Constitution. 
H 
Since the vires of section 8(5) of the Central Act 74 of 1956 had 
been assailed, notice had been issued to the Union of India, Attorncy-
General, and all the States but at the hearing of the writ petition, the 
574 
-
INDIAN CEMENT v. STATE OF ANDHRA PRADESH 
575 
A 
.. 
) 
petitioners gave up the challenge against section 8(5) of the Central Act. 
In view of that, the writ petition was confined to the challenge against 
the two notification of the State of Andhra Pradesh and the lone notifi-
cation of the State of Karnataka. The return to the rule nisi was made 
.. 
.. 
on behalf of the State of Andhra Pradesh. The S\ate of Karnataka chose 
not to make any return to the rule nisi, but its counsel joined at the 
hearing aud contended that the order made by the Karnataka State did 
B 
not affect the provisions in Part XIII of the Constitution. The 
Attorney-General confined his submission to the scope of Part Ill of 
the Constitution and the effect of the notifications on the scheme con-
tained in that part. 
Allowing the writ petition, the Court, 
HELD: The title for Part XIII, which contains the relevant Arti-
cles 30 I, 302, 303 and 304 is "Trade Commerce and inter-course within 
the Territory of India." The true purpose of the provisions contained in 
Part XIII of the Constitution, as elucidated in the different decisions of 
c 
the Constitution Benches of this Court, is that the restriction provided 
D 
for in Article 301 can within the ambit be limited by law made by the 
Parliament and the State legislature. No power is vested in the executive 
authority to act in any manner affecting or hindering the very essence and 
thesis contained in the scheme of Part XIII of the Constitution. It is equally 
clear that the declaration contained in Part XIII of the Constitution is 
'( 
against the creation of economic barriers and or pockets which stand against 
E 
the free flow of trade, commerce and inter-course. [580F; 587H; 588A-B I 
Taxation is a deterrent against free fiow. As a result of favourable 
or unfavourable treatment by way of taxation, the course of flow of 
trade gets regulated either adversely or favourably. If the scheme which 
Part XIII guarantees has to be preserved in national interest, it is 
necessary that the provisions in the Article must be strictly complied 
with. One has to recall the far-sighted observations of Gajendragadkar. 
J. in Atiabari Tea Co. Ltd. v. The State of Assam & Ors., [1961] 
l.S.C.R. 609 and the observations then made obviously apply to cases of 
the

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